More cuts likely, says Mascoll
CHIEF?OPPOSITION?SPOKESMAN?ON?ECONOMIC?AFFAIRS Clyde Mascoll has characterised Government’s projections about the out-turn for 2011 as “very optimistic” in the face of increasingly weak economic indicators.
“This is the brightest indicator for the economy in the year ahead, it is called confidence,” Mascoll said yesterday reacting to Tuesday’s review of the economy’s performance in 2010 by Governor of the Central?Bank, Dr DeLisle Worrell, who said the recession was slowing and forecast a two per cent growth rate this year.
“It is now known that 10 000 jobs have been lost in the economy during the recession,” Mascoll told the DAILY?NATION.
“The Government’s fiscal position on the current account deteriorated further in 2010 to a whopping deficit of $532 million, worse than the $450 million for 2009. In addition, the country’s foreign reserves declined by $35 million last year notwithstanding the unprecedented borrowing of $540 million from foreign sources.”
Mascoll said Government hoped the Budget of November 2010 would narrow the fiscal gap on the current account by $120 million.
“But this still leaves a gaping hole of over $400 million to cover which the Government intends to further narrow in the coming years by cutting expenditure. Already, some public sector workers are being laid off in the statutory boards with more to come, but the confident message is that Government’s strategy is to maintain jobs.
“The most troublesome area of Government expenditure is transfers and subsidies and this is why the Governor of the Central Bank was quick to point out that the subvention to the University of the West Indies now absorbs 23 per cent of the education budget and 21 per cent of the allocation to statutory corporations.
“Further, the Queen Elizabeth Hospital accounts for 41 per cent of the health budget and 31 per cent of the allocation to statutory corporations.”
Mascoll, an economist and former Minister of State in the Ministry of Finance in the Owen Arthur Administration, said that to carry out the mandate of the International Monetary?Fund (IMF)? – an institution of predominantly economists – “Government intends to cut expenditure, which means that the most troublesome areas have to be cut. The cuts cannot, however, stop at the two mentioned statutory corporations because they cannot fill a hole of $400 million.
Mascoll said: “Sometime last year, the Central Bank refused to report the usual net international/foreign reserves and opted to report the gross reserves instead. It is now contending that these reserves are a contingency fund and are not normally used to pay imports.
“The question is: Having borrowed some $540 million from foreign sources in 2010 and the foreign reserves still declined by $37 million, was all of the borrowing used to service debt?”